Almost in parallel with the declaration of the state of alarm over the coronavirus pandemic, and within the package of extraordinary measures of the Government to face the paralysis of the economy due to the total confinement of the population, the Executive offered the possibility of requesting the postponement of the mortgage payment to those people who could not afford it. The term of that mortgage moratorium decreed by the Executive in March has ended, however, there are still many families that have serious difficulties in paying their housing fees. What alternatives can they choose now?
Request the application of the Code of Good Practices
One of the most feasible options is to submit a request to the bank for the application of the measures of the Code of Good Practice, as advised by the Organization of Consumers and Users (OCU). This procedure will allow either the restructuring of the debt, its removal or the dation in payment.
It should be noted that the response of the bank may deny the request. According to the Bank of Spain, this may be due to several reasons: that the applicant does not meet the requirements of being at the exclusion threshold or, simply, has not been able to prove them, or that the applicant is already immersed in a foreclosure procedure and your home auction is announced.
Debt restructuring
The bank may offer a decrease in the mortgage payment temporarily or permanently, with changes in the term or the interest rate, among other aspects. In this case, the applicant must meet some requirements.
– The mortgage must finance the purchase of a habitual residence.
– The fee must exceed half of the net income of the family unit (or 40% if any of its members has a degree of disability of 33% or more).
– The price of housing may not exceed either 300,000 euros in total or the average price per square meter for free housing of the Housing Price Index of the Ministry of Development, increased by 20%.
– The income of the family unit must be limited to three times the annual IPREM (22,546.77 euros in 2020), or 4 or 5 times in case there are disabled or members considered especially vulnerable.
– Within the four years prior to applying, the effort to pay the mortgage with respect to the family income must have multiplied by 1.5 or there must be circumstances such as new members, illnesses or disabilities, etc., that place the family unit in a situation of special vulnerability.
In the case of requesting debt restructuring, the bank must respond to the request within one month. According to the Bank of Spain, the modifications that the entity will apply to the mortgage must be, at least, a lack of capital for five years, an interest rate of Euribor plus 0.25 during the grace period and an extension of the 40-year mortgage term. “If, despite these modifications, the monthly payment to be paid exceeds 50% of the income of the family unit, it is considered that the restructuring plan is not viable,” he adds.
Remove
The bank may also commit to reduce the amount of debt. According to the OCU, “the bank is not obliged to grant it, but to value it when the user meets the above requirements.” Furthermore, for the entity to be able to “forgive” part of that debt, extraordinary circumstances must arise such as that no member of the family unit has other assets or rights that allow the debt to be paid; that this home is the only guarantee for the loan, or that the mortgaged property is the only home owned by the debtors. Be that as it may, it is the bank that has the last word.
Settlement
When none of the previous alternatives are feasible, there is still a third way out: the dation in payment, or what is the same, that the bank agrees to fully cancel the debt in exchange for keeping the house. In this case, the Bank of Spain clarifies that the debtor will have the right to rent the home for two years for an annual rent of up to 3% of the outstanding debt. The entity is not obliged to accept the dation in payment, but it can value it if the price of housing does not exceed 250,000 euros in total nor the average price per square meter for free housing of the Housing Price Index of the Ministry, says the OCU.
What if the requirements to qualify for the code are not met?
The OCU points out that a free negotiation with the bank under two premises: extend the term, so that the pending capital is divided into a greater number of smaller installments, or request a temporary grace period, that is, set a period in which nothing has to be paid, only interest . The Consumer Organization warns that the bank may propose changes to the contract, such as linking it to life insurance or increasing the interest rate similar to that of their current mortgages. In any case, advises not to accept increases above Euribor + 1%, which is currently a common offering.
And as a last option, the OCU raises the sale of the house when you have the certainty that you will not be able to face the mortgage payment even by applying some of the relief measures that the bank can offer. “Otherwise it is exposed to the bank keeping the house and the auction price is not enough to cover the debt,” says the organization.
– .
